The Limits of Price Discrimination
Abstract
We analyze the welfare consequences of a monopolist having additional information about consumers' tastes, beyond the prior distribution; the additional information can be used to charge different prices to different segments of the market, i.e., carry out “third degree price discrimination.” We show that the segmentation and pricing induced by the additional information can achieve every combination of consumer and producer surplus such that: (i) consumer sur plus is nonnegative, (ii) producer surplus is at least as high as profits under the uniform monopoly price, and (iii) total surplus does not exceed the surplus generated by efficient trade. (JEL D42, D83, L12)
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Bergemann et al. (2015) characterize the set of feasible pairs of seller profit and average consumer surplus without the non-discrimination constraint for c=0 as the triangle spanned by certain points.
“The set of feasible pairs of seller profit and average consumer surplus without the nondiscrimination constraint is characterized by Bergemann et al. (2015) for c = 0, as the triangle spanned by the points”
From Non-Discriminatory Personalized Pricing (2025) · cites this paper as Bergemann et al. (2015)
With the non-discrimination constraint, not every outcome in the Bergemann et al. (2015) triangle is feasible.
“With the non-discrimination constraint, however, not every outcome in this triangle is feasible.”
From Non-Discriminatory Personalized Pricing (2025) · cites this paper as Bergemann et al. (2015)
As a consequence of the constructed distributions, the surplus triangle of Bergemann et al. (2015) remains the same for all β∈[0,1].
“As a consequence, the surplus triangle of Bergemann et al. (2015) remains the same for all β ∈ [ 0 , 1 ] .”
From Non-Discriminatory Personalized Pricing (2025) · cites this paper as Bergemann et al. (2015)
Cites
Mussa, M., & Rosen, S. (1978) · Journal of Economic Theory · doi:10.1016/0022-0531(78)90085-6 · Cited by 3,306 · see citing works
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Botta, M., & Wiedemann, K. (2020) · European Journal of Law and Economics · doi:10.1007/s10657-019-09636-3 · Cited by 35 · see citing works
Non-Discriminatory Personalized Pricing
Strack, P., & Yang, K. H. (2025) · arXiv · doi:10.48550/arxiv.2506.20925
- Authors
- Bergemann, D., Brooks, B., & Morris, S.
- Affiliations
- Yale University (US)
- University of Chicago (US)
- Princeton University (US)
- Venue
- American Economic Review
- Publisher
- American Economic Association
- Published
- 2015-03-01
- Volume
- 105
- Issue
- 3
- Pages
- 921-957
- ISSN
- 0002-8282 (ISSN-L)
- OpenAlex
- W3125449324
- Cited by
- 362
- References
- 1
- Citations by year
- 2026: 38 · 2025: 50 · 2024: 42 · 2023: 34 · 2022: 45 · 2021: 25 · 2020: 25 · 2019: 34 · 2018: 21 · 2017: 17 · 2016: 16 · 2015: 12 · 2014: 1 · 2013: 2
- FWCI
- 52.88
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- American Economic Review (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Merger and Competition Analysis
- Social Sciences › Business, Management and Accounting › Marketing › Consumer Market Behavior and Pricing
- Social Sciences › Decision Sciences › Management Science and Operations Research › Auction Theory and Applications
- Keywords
- third-degree price discrimination, monopoly, consumer heterogeneity, consumer surplus, producer surplus, market segmentation, welfare analysis, information asymmetry
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